Game theory and your business

I recently watched a talk that discussed the GAME THEORY and how it is applied to business… Take a look at the reading below and see how it applies to the business you are in. Would love your thoughts and feedback.

Lets understand this game we are playing… the game called work. In game theory there are two kinds of games, there are finite games and there are infinite games.

A finite game is defined as known players, fixed rules, and an an agreed up objective – Australian Football, AFL, we all agree what the rules are and at the end of the 4th quarter, whoever has the most points wins the game and the game is over. No-one every says, if we can just play another 2 more quarters, we can come back and win. Doesn’t happen. you have winners and you have losers.

Then there is an infinite game, an infinite game is defined as known and unknown players, the rules are changeable, and the objective is to keep the game in play. To perpetuate the game.

When you pit a finite player vs a finite player, the system is stable, AFL is stable. When you pit an infinite player vs is infinite player, the system is also stable. The cold war in the US was stable, because there can be no winners and losers, it doesn’t exist. That is not a scenario we want, so you keep the game playing, you keep it stable. And in an infinite game, because there are no winners and losers, players drop out because they run out of the will or resources to play. Then they are replaced by other players, the game perpetuates, the players change out.

Problems arise when you pit a finite player vs an infinite player… because the finite player is playing to WIN and the infinite player is playing to stay in the game. The finite player will always get frustrated, they will find themselves in quagmire. This was the US and Vietnam, the US was fighting to win, Vietnam were fighting for their lives!

Now lets look at the game of business, is by its very definition an infinite game. It has preexisted before every single company ever existed and it will outlast every single company on this planet. But if you listen to the words of most companies… they don’t know the game they are in.

You listen to companies, they want to be No. 1 … based on what metrics, based on what time frames? – Revenue? Market share? number of employees? based on a quarter? a year? 50 years? – I didn’t agree to those standards, you can’t just suddenly arbitrarily say you are no. 1. We didn’t agree to the standards! To BEAT our competition… based on what? and they study their competition trying to out do their competition and yet you rarely see a company taken down by the competitors they know, they always get taken down by the competitors they don’t know. Do you think the TAXI industry even knew UBER existed, or MYOB ever knew the effect XERO was going to have? You can’t make strategic decisions through studying your competition. You can make tactical decisions studying your competition, but not strategic decisions. But when you listen to how most companies play the game, they are in the wrong game! Thats why they get frustrated.

The great organisations understand that they are playing to stay in the game. Jim Sinegal, CEO of Costco says “Wall street is in the business of creating the quarter of the year, we are in the business on building a company for the next 50 years”

The understanding of knowing what game you are in, radically changes the decisions you make and the way you see the world. It is also tremendously good for confidence building. The infinite player understands sometimes you are ahead and sometimes you are behind, sometimes your product is better and sometimes it is worse. The goal isn’t to be the best everyday, the goal isn’t to outdo your competition every day. Thats a finite construction. Finite players play to beat the people around them, infinite players play to be better then themselves. To wake up every single day and say, how can we make our company a better version of itself today than it was yesterday? how can we create a product this week, that is better than the product we created last week?

WE, as individuals, also have to play the infinite game. Its not about being ranked number 1, its not about having more followers on twitter than your friends, its not about out doing anyone. It’s about how to outdo yourself. It’s about how to make sure that the work you are producing is better than the work you produced before. You ARE your competition, and that is what ensures you stay in the game the longest. And that is what ensures you find joy. Because the joy comes, not from comparison, the joy comes from advancement.

The problem is, we are human beings, and we LOVE to compare… We love a ranking, boy do we love a ranking, top 10 this, best seller that, we love a ranking. Every industry has got its own rankings and we love to be on those rankings. Even though most of those rankings are arbitrary and you can pretty much foil most of them, buy your way onto most of them. They did a study where they asked people whether they wanted a free $400,000 house on a block where all the other houses on the block were $100,000 houses OR a free $1million house where on the block the rest of the houses were $4million. Most people took the $400k house. We just love to be better than each other. But that is a depressing way to live a life. There is an entire section in the book shop called “self-help”, and there is no section in the book shop called “help-others”. The way we fix problems in the world is not demanding people help us… No, it should be how can I help someone else. That’s what it is about, its about service to others. Because thats what it means to be human.

Everything about our make-up, our biology and anthropology is designed to help us take care of each other. We all have a responsibility in our tribe. If you want to have a happy, successful, fulfilling, confident life, you have to commit yourself to take care of the people around you. You have to be an infinite player, that’s just how it works.